Dynamic Arbitrage‐Free Asset Pricing with Proportional Transaction Costs

Shunming Zhang (), Chunlei Xu and Xiaotie Deng

Mathematical Finance, 2002, vol. 12, issue 1, 89-97

Abstract: This paper studies multiperiod asset pricing theory in arbitrage‐free financial markets with proportional transaction costs. The mathematical formulation is based on a Euclidean space for weakly arbitrage‐free security markets and strongly arbitrage‐free security markets. We establish the weakly arbitrage‐free pricing theorem and the strongly arbitrage‐free pricing theorem.

Date: 2002
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